ASSESSING THE FINANCIAL
OUTLOOK OF MILWAUKEE
COUNTY’S BEHAVIORAL
HEALTH DIVISION
March 2013
Rob Henken, President
Vanessa Allen, Researcher
BHD Fiscal Analysis Page 2
ABOUT THE PUBLIC POLICY FORUM
Milwaukee-based Public Policy Forum – which was established in 1913 as a local government
watchdog – is a nonpartisan, nonprofit organization dedicated to enhancing the effectiveness of
government and the development of southeastern Wisconsin through objective research of
regional public policy issues.
EDITOR’S NOTE
This report was undertaken as part of a technical assistance project commissioned by the
Milwaukee County Department of Health and Human Services (DHHS) for the purpose of
enhancing the department’s understanding of fiscal trends and challenges faced by its Behavioral
Health Division (BHD), and advising it on strategies for maximizing the opportunities presented
by the Affordable Care Act. The research for this report was conducted from April through
September 2012, and the report was delivered to the department in October 2012.
Subsequent to the report’s delivery, the authors met several times over several months with
County officials to discuss and review the report’s findings and those of a complimentary report
written by Community Advocates’ Public Policy Institute. Although the report is of a technical
assistance nature, it is being published now for broad consumption because of its relevance to
public deliberations about the future of Milwaukee County’s Mental Health Complex. Though
the research in this report is now nearly five months old, it remains timely and still speaks
accurately to the current fiscal challenges facing BHD. We hope that it will be useful for
policymakers, stakeholders and citizens as they consider options for improving mental health
care in Milwaukee County.
ACKNOWLEDGMENTS
Report authors would like to thank the leadership and staff of DHHS and BHD for their
assistance in providing budget and programmatic information and patiently answering our
questions. We especially appreciate the many hours of assistance provided by BHD
Administrator Paula Lucey and DHHS Budget Manager Alex Kotze. We would also like to
thank Community Advocates and its Public Policy Institute for subcontracting with the Forum to
produce this report and for working with us on the overall technical assistance project.
Finally, the Forum would like to acknowledge the generosity of our 2013 Pillars of Public Policy
and Sentinels of Civil Conduct, who have made generous grants to support our research in
commemoration of our 100th anniversary celebration in 2013.
Pillars of Public Policy: Helen Bader Foundation, Herzfeld Foundation, Northwestern Mutual,
Wisconsin Energy Foundation
Sentinels of Civil Conduct: BMO Harris Bank N.A., Baird, Potawatomi Bingo Casino
BHD Fiscal Analysis Page 3
TABLE OF CONTENTS
INTRODUCTION ..................................................................................................................................................... 4
BACKGROUND ........................................................................................................................................................ 6
BHD FISCAL TRENDS ........................................................................................................................................... 8
Five-Year Comprehensive View.................................................................................................................. 8
Three-Year Focused View ............................................................................................................................. 9
BHD 2012 ADOPTED BUDGET AND YEAR-TO-DATE EXPERIENCE .............................................. 23
BHD 2013 BUDGET REQUEST ...................................................................................................................... 27
LOOKING TOWARD THE FUTURE ............................................................................................................... 30
Expenditures ................................................................................................................................................... 30
Revenues........................................................................................................................................................... 36
BHD Fiscal Analysis Page 4
INTRODUCTION
The Public Policy Forum has partnered with Community Advocates’ Public Policy Institute in a
project designed to advise Milwaukee County’s Behavioral Health Division (BHD) on ways to
strategically prepare for implementation of the Affordable Care Act (ACA). That project was
launched in April 2012 with the financial support of BHD and the Milwaukee County
Department of Health and Human Services (DHHS).
A central element of planning for ACA implementation is understanding and assessing BHD’s
current fiscal condition and challenges. The Forum’s role in the project was to conduct such an
assessment as a means of informing deliberations about possibilities for maximizing revenue
impacts associated with ACA. Those may include opportunities to secure health insurance
coverage for uninsured individuals currently being served by BHD, and to broaden coverage for
those currently covered by the state’s Badger Care program or other public funding sources.
The need for an outside, independent assessment of BHD’s fiscal condition also was dictated by
the mental health redesign process currently being conducted by BHD. That process involves a
community-wide planning effort to review findings from several programmatic analyses of
mental health services in Milwaukee County (including a comprehensive report by the Human
Services Resources Institute co-authored by the Public Policy Forum), and to recommend
strategies for implementing redesign initiatives. A particular focus is the need to devise ways to
enhance community-based mental health services in conjunction with possible downsizing of
BHD’s inpatient and nursing home facilities.
Several work groups have been formed by the county’s Mental Health Redesign Task Force to
address specific areas of programmatic concern, and several broad programmatic
recommendations have been issued. Thus far, however, the planning process has not included a
component to identify and weave BHD’s financial challenges and opportunities into redesign
planning. Consequently, another important objective of this report is to provide a baseline fiscal
assessment that can be used to inform the mental health redesign process and ensure that
programmatic recommendations are accompanied by a fundamental understanding of BHD’s
current financial constraints and prospects.
After a background section that outlines BHD’s general funding and programmatic structure, this
paper is divided into four primary sections:
The first analyzes actual expenditure and revenue data from the 2009-2011 period – broken
down by key service areas and revenue sources – to provide perspective on fiscal trends and
how they impact BHD’s long-term financial picture.
The second analyzes BHD’s fiscal performance during the first several months of 2012 to
gain insight into the financial impacts of recent efforts to revamp inpatient services and
initiate enhanced community-based services, and how those efforts have affected the
division’s financial condition and outlook.
BHD Fiscal Analysis Page 5
The third analyzes BHD’s 2013 requested budget to provide even greater perspective on the
challenges posed by recent fiscal trends and the impacts of efforts to initiate one of the key
components of mental health redesign – the downsizing of BHD’s inpatient and nursing
home capacity and the transfer of resulting savings to community-based services.
Finally, the fourth section ties the three separate pieces of analysis together by offering
several overall observations and conclusions.
As noted above, the purpose of this paper is not to critique BHD’s fiscal management, but
instead to objectively analyze its financial challenges and opportunities so that Milwaukee
County budget officials and policymakers – as well as the dozens of public and private sector
individuals who are devoting their time to the county’s mental health redesign process – will
have an independent fiscal assessment with which to consider programmatic changes moving
forward.
BHD Fiscal Analysis Page 6
BACKGROUND
BHD provides a variety of inpatient, emergency and community-based care and treatment to
children and adults with mental health and substance abuse disorders. The county’s role is
dictated primarily by the Wisconsin Statutes, which specifically assign to Milwaukee County
government responsibility for the “management, operation, maintenance and improvement of
human services” in the county, including mental health treatment and alcohol and substance
abuse services (Section 46.21).
Section 51.42 of the Wisconsin Statutes lays out more specifically the mandated role for
Milwaukee County pertaining to the provision of behavioral health services:
“The county board of supervisors has the primary responsibility for the well−being,
treatment and care of the mentally ill, developmentally disabled, alcoholic and other drug
dependent citizens residing within its county and for ensuring that those individuals in need
of such emergency services found within its county receive immediate emergency services.
This primary responsibility is limited to the programs, services and resources that the
county board of supervisors is reasonably able to provide within the limits of available state
and federal funds and of county funds required to be appropriated to match state funds.”
The county has interpreted this language as a legal requirement to provide immediate emergency
services for persons with mental illness and substance abuse disorders. That interpretation, in
turn, has been defined as a requirement that the county also provide a broad range of inpatient,
long-term care and outpatient services to indigent persons in order to curtail the need for
emergency services and meet the more general statutory language pertaining to well-being,
treatment and care. Notably, private health systems and hospitals also have taken into account
this interpretation and have considered it to be Milwaukee County’s ultimate responsibility to
provide for the care of indigent individuals with mental health and substance abuse disorders.
At its Mental Health Complex, Milwaukee County owns and runs an inpatient hospital consisting
of five licensed units (one of which is for children and adolescents); two nursing home facilities
(a 70-bed nursing home for individuals with complex needs who require long-term treatment and
a 72-bed facility for individuals diagnosed with both developmental disability and serious
behavioral health needs); a Psychiatric Crisis Service (PCS) that serves persons in need of
emergency mental health treatment, more than 60% of whom typically are brought in by law
enforcement on an Emergency Detention; a mental health Access Clinic; and an Observation
Unit. It also contracts for a wide variety of community-based services, including targeted case
management, community support programs, community residential services, outpatient
treatment, substance abuse treatment and recovery support, crisis respite, and specialized
services for children and adolescents.
The total expenditure budget for BHD in 2012 is $188 million, making it the second largest
organizational unit in Milwaukee County government after the Family Care program’s Care
Management Organization (CMO). BHD’s 2012 property tax levy is $61 million, again ranking
it second after the Office of the Sheriff. Other key revenue sources are state/federal revenue and
direct reimbursement from patient care.
BHD Fiscal Analysis Page 7
BHD also is one of the county’s largest functions in terms of individuals served. For example,
on an annual basis, BHD typically handles close to 4,000 inpatient and 13,000 PCS admissions,
provides or administers services to more than 2,000 individuals in case management programs,
and administers community-based substance abuse services to more than 4,500 individuals.
Finally, BHD is the second largest county organizational unit in terms of its number of
employees (first is the sheriff), with 810 full-time equivalent employees (FTEs) budgeted in
2012.
BHD Fiscal Analysis Page 8
BHD FISCAL TRENDS
Five-Year Comprehensive View
Table 1 shows BHD’s actual expenditure, revenue and FTE history from 2007 to 2011. For ease
of comparison, expenditures and revenues for the County Health Programs Division (CHP) have
been subtracted from these figures for 2010 and 2011. CHP was formerly a separate
organizational unit in the county budget but was moved under the jurisdiction of BHD in 2010.
The division once housed the General Assistance Medical Program (GAMP) but today consists
only of the Emergency Medical Services (EMS) program and is now known as the EMS
division.
Table 1: BHD actual expenditures and revenues, 2007-2011
2007 2008 2009 2010 2011
Personal Services w/out fringe 46,989,819 48,480,607 48,219,354 45,225,202 46,382,064
Employee fringe benefits 28,154,850 28,231,671 27,801,100 31,864,059 31,990,379
Services 9,843,915 10,084,964 9,661,202 16,936,471 19,394,747
Commodities 7,857,374 8,187,375 9,703,573 6,235,906 7,079,988
Other charges* 71,835,699 73,111,172 77,179,643 75,129,393 74,371,405
Debt and depreciation - - - - -
Capital outlay 127,715 82,792 63,672 77,706 325,256
Capital contra - - - - -
County service charges 38,239,417 41,409,987 38,185,131 37,784,722 40,421,891
Abatements (31,329,741) (34,523,950) (32,732,183) (32,681,691) (35,170,135)
Total Expenditures 171,719,048 175,064,618 178,081,492 180,571,767 184,795,596
Direct revenue 63,542,361 57,361,571 60,144,434 60,278,188 61,355,869
State and federal revenue 62,415,021 58,353,670 59,686,856 61,227,168 61,584,993
Indirect revenue 2,101,285 10,700,698 8,958,796 9,932,388 10,002,135
Total Revenues 128,058,667 126,415,939 128,790,086 131,437,744 132,942,996
Property Tax Levy 43,660,381 48,648,679 49,291,406 49,134,023 51,852,600
FTE positions 877 891 851 802 817
Source: BHD BRASS fiscal reports * Other charges is the biggest expenditure line item because it includes the division’s huge portfolio of service
contracts with community-based providers for services ranging from outpatient psychiatric care, to case
management, to substance abuse treatment.
This high-level view of BHD’s five-year fiscal trends reveals several observations and questions,
including the following:
BHD’s total expenditures increased by $13 million (7.6%) over the five-year period (which
certainly is respectable given the general rate of health care inflation), while its non-property
tax revenues increased by only $5 million (3.8%), producing a need for an $8 million (19%)
increase in its property tax levy allocation. What is the cause of this discrepancy between the
rate of growth of costs versus non-property tax revenues, and is the division’s continued
reliance on property taxes to fill the gap sustainable?
BHD Fiscal Analysis Page 9
Despite substantial increases in fringe benefit and other personnel costs countywide, BHD
has kept those costs in check by reducing FTEs. Presumably, that has occurred largely
because of initiatives during this period to contract out housekeeping, dietary and other
services, which is reflected by the increased expenditures for services in 2010 and 2011. Are
there additional strategies that might be pursued to keep a lid on personnel costs in future
years, or must BHD’s challenged revenue streams absorb annual pay and benefit increases in
future years that will be similar in magnitude to other county departments?
Given the rate of health care inflation, can an entity that exists largely to provide or secure
health care services for indigent individuals on behalf of the state and federal governments
survive financially when its state and federal revenue streams are stagnant?
Three-Year Focused View
Expenditures
In Milwaukee County’s published budget documents, BHD’s budget is broken down into eight
distinct cost centers: Management/Support Services; Nursing Facility Services; Acute
Adult/Child Inpatient Services; Adult Community Services; Child and Adolescent Services;
Adult Crisis Services; AODA Services; and Emergency Medical Services. The share of BHD’s
expenditure budget devoted to each of those cost centers in 2011 is shown in Figure 1.
Figure 1 – BHD 2011 expenditures by cost center
Source: Actual 2011 breakdown taken from BHD’s 2013 Requested Budget narrative
Management / Support Services
1% Inpatient: Nursing Homes
16%
Inpatient: Acute Adult/Child
Services20%
Adult Community Services
15%Child and
Adolescent Services
25%
Adult Crisis Services
10%
AODA Services9%
Emergency Medical Services
4%
BHD Fiscal Analysis Page 10
For the purposes of this analysis, we focus only on four of the eight BHD cost centers that are
directly relevant to the county’s mental health redesign planning. The four that are excluded are
Child and Adolescent Services, which essentially consists of BHD’s Wraparound program, a
comprehensive array of community-based behavioral health services for children and adolescents
that are administered under an innovative reimbursement system using state and federal funding
(and involving no county property tax levy); AODA services, which also involve limited county
property tax levy (because of various federal and state grant revenues) and which largely rely on
dedicated funding streams that fall outside of the purview of mental health redesign planning1;
EMS, which also falls outside of the purview of mental health redesign; and Management and
Support Services, which comprises only a small portion of BHD’s direct expenditure budget.2
Subtracting those programs leaves us with four cost centers totaling approximately $117 million
in budgeted expenditures in the 2012 budget that are the subject of this analysis. Those cost
centers also account for about 91% of BHD’s total budgeted property tax levy, making them the
critical areas for trend analysis and deliberation in the context of the county’s structural deficit
and annual budgetary pressures.
To further explore those areas of BHD’s budget, we conducted a detailed examination of the last
three years of actual expenditure and revenue data, broken down by the four primary categories
of mental health services that will be most impacted by ACA and that are the primary subject of
adult mental health redesign efforts: inpatient, nursing homes, psychiatric crisis services, and
community services. It is important to note that the first three categories relate primarily to
services that are conducted onsite at BHD’s Mental Health Complex, while the fourth category
consists of services that are provided either by BHD or contracted providers in the community.
This is an important distinction in the context of mental health redesign, which is focused in part
on shifting additional BHD services from the Mental Health Complex into community settings.
For purposes of our analysis, we further break down the four primary service categories into
subcategories, as described below:
Inpatient – This category is broken down into the subcategories of acute adult inpatient,
which encompasses services associated with BHD’s four licensed inpatient units (current
combined average daily census of about 70 patients); and child and adolescent inpatient,
which encompasses services associated with BHD’s single Children’s and Adolescent
Inpatient Unit (CAIS – current average daily census of about seven patients).
Psychiatric Crisis Services (PCS) – This category encompasses services associated with
BHD’s mental health emergency room, which admits about 13,000 patients per year; its
1 While mental health and AODA services traditionally have been funded under distinct revenue streams and have
existed as distinct program areas in BHD’s budget, a new initiative aimed at coordinating service delivery for the
substantial percentage of BHD consumers who suffer from co-occurring disorders may alter that paradigm in the
future. 2 Management and support services are a substantial cost in BHD’s budget, but the costs for those services are
spread out among BHD’s various cost centers. This dynamic receives considerable discussion in the final section of
this report, which explains how management and support costs are distributed to distinct operational areas in BHD’s
budget, thus impacting the financial status of those areas of operation.
BHD Fiscal Analysis Page 11
onsite mental health access clinic and observation unit; and its mobile crisis teams, which
directly support onsite crisis operations. We exclude community-based crisis respite beds
and crisis resource centers operated by community agencies, as well as other community-
based crisis services that are typically included in this service category by BHD. Instead,
those services are shown as an independent line item under the community services category.
We organize the services in this manner to isolate crisis-related expenditures that are
occurring primarily at the Mental Health Complex versus those that are taking place at
community-based sites.
Nursing Homes – This category is broken down per BHD’s two long-term care facilities
located at its Mental Health Complex: Hilltop, which provides care to individuals with a dual
diagnosis of developmental disability and serious behavioral health conditions (current
average daily census of about 64 patients); and Rehab Central, which serves individuals who
have complex and interacting medical, rehabilitative and psychosocial needs (current average
daily census of about 66 patients).
Community Services – This category is broken down into six primary categories of
community-based mental health services: Day Treatment, which provides therapeutic
services on an outpatient basis to about 13 patients daily; Community Support Program
(CSP), which provides high-intensity case management services to more than 1,300 people
with chronic mental illness annually; Targeted Case Management (TCM), which provides
medium-intensity case management services to more than 1,200 people annually; Service
Access to Independent Living (SAIL), which is the centralized intake assessment unit at
BHD that assesses the needs of individuals and facilitates their access to community-based
services and supports; community-based crisis services, which during the 2009-2011
timeframe consisted largely of three eight-bed crisis stabilization centers and a community-
based crisis resource center; and “Other community services,” which contains all other BHD-
administered mental health community services not included in the five categories above,
including community-based residential facilities, outpatient treatment, and prevention and
intervention services.
Table 2 shows actual expenditures for these programs and services for the 2009-2011 timeframe,
while Figures 2, 3, 4 and 5 depict those expenditure totals in a series of bar graphs.
BHD Fiscal Analysis Page 12
Table 2 – BHD expenditures in “four key service areas” (inpatient, PCS, nursing home and
community services), 2009-2011
2009 2010 2011 2009-2011 Change
INPATIENT
Acute Adult Inpatient 31,034,465 33,418,023 32,789,264 1,754,798 5.7%
Child & Adolescent Inpatient 5,455,167 5,845,757 5,939,470 484,303 8.9%
TOTAL 36,489,632 39,263,779 38,728,733 2,239,101 6.1%
PSYCHIATRIC CRISIS SERVICES TOTAL 16,656,843 16,870,442 18,962,747 2,305,905 13.8%
NURSING HOME
Hilltop 15,200,977 15,349,238 16,691,928 1,490,952 9.8%
Rehab Central 13,689,632 13,303,236 14,311,442 621,810 4.5%
TOTAL 28,890,609 28,652,474 31,003,370 2,112,761 7.3%
COMMUNITY SERVICES
Day Treatment 2,175,128 1,904,575 2,182,728 7,600 0.3%
CSP 9,407,231 9,854,590 10,178,138 770,907 8.2%
TCM 4,826,990 4,349,195 4,132,733 -694,257 -14.4%
SAIL 3,939,731 3,660,956 3,442,126 -497,604 -12.6%
Community-based crisis services 520,644 1,100,935 739,530 218,886 42.0%
Other community services 7,944,084 7,532,043 8,606,986 662,902 8.3%
TOTAL 28,813,808 28,402,295 29,282,242 468,434 1.6%
TOTAL BHD EXPS 110,850,892 113,188,991 117,977,093 7,126,201 6.4% Source: BHD BRASS fiscal reports; BHD's report on community services branch contract expenditures by service
area
Figure 2 – BHD inpatient expenditures, 2009 through 2011
Source: BHD BRASS fiscal reports
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
Acute Adult Inpatient Child & AdolescentInpatient
TOTAL
Mill
ion
s
2009 2010 2011
BHD Fiscal Analysis Page 13
Figure 3 – BHD PCS expenditures, 2009 through 2011
Source: BHD BRASS fiscal reports
Figure 4 – BHD nursing home expenditures, 2009 through 2011
Source: BHD BRASS fiscal reports
$0.0
$5.0
$10.0
$15.0
$20.0
Crisis Services
Mill
ion
s2009 2010 2011
$0
$5
$10
$15
$20
$25
$30
$35
Hilltop Rehab Central TOTAL
Mill
ion
s
2009 2010 2011
BHD Fiscal Analysis Page 14
Figure 5 – BHD community services expenditures, 2009 through 2011
Source: BHD BRASS fiscal reports; BHD's report on community services branch contract expenditures by service
area
Examining BHD’s inpatient, PCS, nursing home, and community-based services expenditures
from this perspective reveals that all four service categories experienced expenditure increases in
the 2009-2011 timeframe. It is worth noting, however, that inpatient, PCS, and nursing home
expenditures rose at a faster rate than those for community services (6.1%, 13.8% and 7.3% for
inpatient, crisis and nursing homes respectively, versus 1.6% for community services). In fact,
we see that expenditures for the three service areas that largely comprise Mental Health Complex
operations increased 8.1% over the period.
That finding is not surprising given the context in which BHD was operating during the three-
year period. 3 In early 2010, a patient incident at the Mental Health Complex led to an
investigation by the federal Center for Medicare and Medicaid Services and a threat to cut off
federal reimbursement to BHD, which was lifted shortly thereafter following a series of physical
and programmatic improvements. Those improvements involved considerable increases in
security, physical plant improvements and enhanced one-on-one staffing levels, as well as
increased expenditures in the 2011 budget for major maintenance ($500,000), new clinical
positions ($1.9 million), quality assurance/staff education ($562,000), and overtime ($675,000).
Those expenditure increases were allocated across several service categories within the Mental
Health Complex, including PCS and Hilltop (where the patient incident occurred). In addition,
since 2009, BHD has been working to restore its Joint Commission accreditation, an undertaking
that involves several physical and staffing improvements to its onsite operations.
3 We were curious about whether increases in BHD’s share of Milwaukee County “legacy costs” (i.e. costs related to
the county’s pension and retiree health care obligations) were a major contributor to the expenditure increases in the
predominantly county-staffed functions housed at the Mental Health Complex , but our analysis showed that BHD’s
overall legacy benefits actually decreased from $15.2 million in 2010 to $14 million in 2011.
$0
$5
$10
$15
$20
$25
$30
$35
Day Treatment CSP TCM SAIL Community-basedcrisis services
Other communityservices
TOTAL
Mill
ion
s
2009 2010 2011
BHD Fiscal Analysis Page 15
At the same time, BHD took several steps during that period to reduce Mental Health Complex-
related overhead costs in an effort to offset the expenditure increases cited above, including
initiatives to outsource both dietary and housekeeping services. In fact, had it not been for those
initiatives, the total increases observed for inpatient, PCS and nursing home services from 2009
to 2011 would have been at least $2 to $3 million higher.
The fact that these key mental health service areas were granted a nearly $7 million increase
during a time when Milwaukee County was struggling with severe budgetary challenges may
have reflected the intense scrutiny under which the division was operating during this period.
Indeed, it could be argued that the county had little choice but to invest additional resources
given the attention of state and federal regulators and the general public.
A key question today is whether annual increases of this magnitude can be sustained, and
whether they need to be. To the extent that BHD was able to use this “opportunity” to shore up
its staffing levels and physical plant at the Mental Health Complex, then it is possible that the
need for future annual increases in the 4% range for services at the Complex will diminish. If
that is the case, then the county as a whole may experience some limited relief, or it is possible
that resources that would have been targeted for onsite operations could be shifted to
community-based services.
On the other hand, given general trends in health care inflation and the fact that BHD now has
taken advantage of some of its biggest opportunities for overhead reductions, it may not be
possible for the county to avoid annual increases of this magnitude to maintain appropriate
service quality without significant changes to Mental Health Complex operations. In future
sections of this report, we will examine how BHD grappled with this issue in its 2012 budget and
2013 budget request.
Locally Allocated Resources
The use of total expenditure data to analyze how BHD cost trends are impacting Milwaukee
County’s overall finances is somewhat limited by the fact that many of the inpatient, nursing
home and community services provided by BHD are supported (at least in part) by cost-based
reimbursement from federal funding sources like Medicaid and Medicare. Consequently,
depending on the reimbursement rates established by the federal and state governments, at least
some of the annual inflationary cost increases associated with those services are matched by
increases in outside revenue, thus decreasing the negative impact on the county’s bottom line.
It is important, therefore, to examine trends in the use of locally allocated resources to support
mental health services, as it is the competition for those limited resources among the county’s
various functions that dominates annual budget deliberations. The property tax levy is by far the
county’s largest source of locally allocated funding at $275 million in the 2012 budget. Other
major revenue streams that are allocated at the discretion of the county executive and county
board are the sales tax ($64 million) and state shared revenue ($31 million).
Under the county’s budget methodology, those revenue sources are blended in that the total
amount of property tax levy that is shown in departmental budgets actually includes all non-
BHD Fiscal Analysis Page 16
departmental revenues. While the specifics of this allocation methodology are complicated and
not directly germane to this analysis, what is most relevant is that given the numerous and varied
demands on the county’s limited locally allocated sources of revenue (which only comprise
about 30% of its overall budget), the need for increased property tax levy allocations to meet
growing costs for mental health services creates a significant financial challenge.
An analysis that only tracks BHD’s annual property tax allocations as a means of assessing that
challenge will not take into account, however, the interplay in BHD’s budget between property
tax levy and its Basic County Allocation (BCA) from the state’s Community Aids program.
Community Aids is a source of somewhat flexible funding provided by the State of Wisconsin
that can be used at counties’ discretion for certain health and human services programs and
services. In 2012, Milwaukee County will use about two-thirds of its $35 million BCA
allocation to support BHD programs and services, with the remainder allocated to other DHHS
divisions.4 BCA is combined with property tax levy in this analysis because BHD uses these
sources interchangeably to pay for services that are not covered with other forms of
reimbursement or grant revenue.
In Figure 6, we show the combined property tax levy and BCA dedicated to the four major
mental health service areas in the 2009-2011 timeframe. This analysis shows increases in
combined levy and BCA for all four service areas during the period, with an $800,000 increase
for inpatient, $2.1 million for crisis services and $2.5 million each for nursing homes and
community services. Combined, the four services experienced an 11.7% increase in property
tax/BCA expenditures from 2009 to 2011, or an average of about 5.8% per year.
Figure 6 – Property tax levy and BCA revenues, 2009 through 2011
Source: BHD BRASS fiscal reports
4 The county gradually has shifted a greater proportion of its BCA to BHD during the past five years, as the
allocation used to be roughly split between BHD and other DHHS divisions. This is in part because program
responsibilities in other parts of DHHS have diminished with the state’s takeover of the Income Maintenance
function. The County’s total BCA allocation has been largely flat for most of the past decade, and has actually
declined in recent years because of the Income Maintenance shift and a 10% cut in the 2011-13 State budget.
$0
$10
$20
$30
$40
$50
$60
$70
$80
Inpatient Crisis Services Nursing homesCommunity services TOTAL
Mill
ion
s
2009 2010 2011
BHD Fiscal Analysis Page 17
On its face, even an annual increase in local mental health care-related expenditures in the 6%
range should not raise eyebrows in light of the magnitude of overall health care inflation in
southeast Wisconsin and the nation. For Milwaukee County government, however, such annual
increases are quite problematic, as the county’s major sources of locally-allocated revenues that
support such expenditures – the property tax, sales tax, and state shared revenue – generally have
lagged even general inflation, as shown in Figure 7.
Figure 7: Milwaukee County local tax revenues, shared revenue, and inflation, 2003 to 2011
(Actual revenues indexed to 100)
Source: Milwaukee County Department of Administrative Services
Patient Care Revenue
To gain further insight into why such substantial increases in property tax/BCA allocations were
required to support mental health services over the three-year period, we next examine the other
major revenue source that supports BHD’s mental health programs and services: reimbursement
revenue from state, federal and commercial insurance sources that is directly linked to services
provided. Table 3 shows the amounts and sources of “patient care” revenue received by all
BHD programs and services during the 2009-2011 timeframe,5 while Figure 8 shows each
source as a proportion of BHD’s total patient care revenue pie.
5 It is important to note that the annual figures cited in this table reflect the cash received in each respective year, but
not necessarily the year in which the service was provided.
95
100
105
110
115
120
125
2003 2004 2005 2006 2007 2008 2009 2010 2011
Property tax
Sales tax
State Shared
Inflation
BHD Fiscal Analysis Page 18
Table 3 – BHD patient care revenue, 2009 through 2011
Funding source 2009 2010 2011
T19 of Wisconsin 15,019,389 16,298,445 14,718,765
T19 HMO 5,776,795 6,267,783 7,997,044
T18-Blue Cross 4,483,380 4,635,423 5,105,472
Commercial HMO 2,096,014 1,700,714 2,277,934
Commercial insurance 1,188,006 1,191,066 979,821
Responsible party 1,081,616 1,065,721 1,005,125
T18-WPS 381,260 425,838 318,453
Other 282,796 544,038 409,585
30,309,256 32,129,028 32,812,199 Source: BHD 2011 & 2012 quarterly Fiscal and Program Dashboard reports
Figure 8 – Patient care cash received by funding source, 2011
Source: BHD 2011 & 2012 quarterly Fiscal and Program Dashboard reports
The largest source of patient care revenue is the Medicaid program (T19). BHD receives
Medicaid revenues directly from the state for patients who are Medicaid-eligible, and from
private HMO’s that manage the care of Medicaid-eligible individuals under contract with the
state. The second largest source is T18, which refers to the federal Medicare program.
T19 of Wisconsin
45%
T19 HMO24%
T18-Blue Cross16%
Commercial HMO
7%
T19 of Wisconsin T19 HMO
T18-Blue Cross Commercial HMO
Commercial insurance Responsible party
T18-WPS Other
BHD Fiscal Analysis Page 19
In Table 4, we isolate patient care revenue that collectively stemmed only from inpatient, PCS,
nursing home, and community services, and show those three-year revenue trends in comparison
to the other major sources of revenue that support those services. This table shows the essence
of BHD’s fiscal challenge: the growth in patient care and “other” revenues did not keep
pace with BHD’s mental health expenditure needs over the 2009-2011 period, thus
necessitating a $7.8 million increase in property tax/BCA expenditures during the period.6
Table 4 – BHD major revenue sources supporting four key service areas, 2009-2011
2009 2010 2011 Change
Property tax levy 45,218,046 47,040,830 53,358,487 8,140,442
BCA 21,723,931 21,624,670 21,412,170 -311,761
Patient care revenue 26,888,697 27,784,854 28,564,170 1,675,473
Other 14,990,968 15,187,181 13,274,236 -1,716,732
TOTAL 108,821,642 111,637,535 116,609,063 7,787,422
Source: BHD BRASS fiscal reports
As is the case with nearly all public and private health care providers that serve low-income
populations, the amount of patient care revenue received by BHD is far less than the cost of
services provided. This discrepancy is based on four primary factors: 1) a sizable percentage of
BHD’s clients lack any form of insurance coverage and the means to pay for services out of their
own pockets; 2) not all of the services provided by BHD are eligible for reimbursement from
Medicaid, Medicare or private insurance plans; 3) even for those services that are covered, public
and private insurance plans often do not reimburse at rates that reflect BHD’s costs; and 4) for
various reasons linked to the proficiency of its billing capabilities, BHD has not been able to
collect all reimbursement to which it is entitled.
Figures 9 and 10 provide additional perspective by breaking down BHD’s inpatient and crisis
admissions by health insurance payer source. This information shows that about 13% of all
patients admitted to inpatient units and 26% admitted to PCS lack any form of health insurance.
In addition, another 8% of inpatient admissions have Medicaid coverage but fall between the
ages of 21 and 64, which means that BHD cannot receive reimbursement because of its “IMD
exclusion” (discussed in greater detail below).
6 Other revenues include a variety of miscellaneous revenue sources, including federal Community Options Program
(COP) funds, state grants, reimbursement from the Wisconsin Medicaid Cost Report (WIMCR) program,
Potawatomi revenue, and Institute for Mental Disease revenue from the state that reflects the cost of serving certain
patients in the community who otherwise would qualify for inpatient/nursing home care.
BHD Fiscal Analysis Page 20
Figure 9: Inpatient admissions by health insurance payer source, 2011
Figure 10: Psychiatric Crisis Service admissions by health insurance payer source, 2011
Medicare(Title 18)
15%
Medicaid(Title 19)
(under age 21 & over age 64)
17%
Medicaid(Title 19)
(ages 21-64)8%
Medicaid (Title 19) HMO
32%
Commercial Insurance
5%
Commercial HMO
7%
Self Pay (no insurance)
13%
Other3%
Medicare (Title 18)
14%
Medicaid(Title 19)
(under age 21 & over age 64)
2%
Medicaid (Title 19)
(ages 21-64)9%
Medicaid(Title 19) HMO
29%
Commercial Insurance
6%
Commercial HMO
8%
Self Pay(no insurance)
26%
Other6%
BHD Fiscal Analysis Page 21
In Figure 11, we show the discrepancy between BHD billable services and patient care revenue
collections by showing actual patient care revenue collected by BHD from 2009 through 2011
versus patient care costs for the various categories of mental health services.
Figure 11: Inpatient revenue reimbursement by category, 2009 through 2011
Source: BHD 2011 & 2012 quarterly Fiscal and Program Dashboard reports
Taken together, these figures reinforce the fact that BHD receives patient care reimbursement for
only a fraction of its patient care costs, and that reimbursable costs have been growing at a much
faster clip than actual reimbursements. Even more important, they also highlight the difficulty
the division may have in reversing this problem by showing the sizable percentage of uninsured
patients; and the even greater percentage who are covered by Medicaid, which is a funding
source that is heavily influenced by the fiscal challenges facing both the federal and state
governments.
BHD’s largest source of Medicaid reimbursement – shown above as T19 of Wisconsin revenue –
consists of several subcategories, the largest of which is reimbursement based on rates
established annually by the Wisconsin Department of Health Services (DHS) for emergency,
inpatient, nursing home and day treatment services provided to Medicaid-eligible individuals at
the Mental Health Complex.7 As shown in Table 3 above, BHD’s T19 reimbursement from the
state increased substantially from 2009 to 2010, but then decreased even more substantially from
2010 to 2011.
7 BHD and its contract vendors also receive smaller amounts of Medicaid reimbursement on roughly a 60%
federal/40% local basis for certain case management and related community services. This revenue is not included
in the T19 of Wisconsin revenue category.
23
%
59
%
24
%
25
%
43
%
27
%
61
%
24
%
21
%
43
%
28
%
61
%
21
%
21
%
35
%
$0
$5
$10
$15
$20
$25
$30
$35
$40
Acute adultinpatient
CAIS Crisis services Communityprograms
Nursing homes
2009 reimbursements 2010 reimbursements 2011 reimbursements
$1.1 million increase
$0.9 million decrease
$3.4 million increase
$0.6 million increase
$4.9 million
increase
31
%
33
%
30
%
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
TOTAL
$9 million increase in overall inpatient
reimbursable costs
$1.7 million increase in reimbursements
BHD Fiscal Analysis Page 22
Any efforts that BHD might wish to undertake to increase its receipt of T19 revenue from the
state are impacted by the following challenges:
BHD’s inpatient operation is classified under federal guidelines as an “Institute for
Mental Disease (IMD),” which prohibits it from collecting state Medicaid reimbursement
for inpatient services provided to individuals between the ages of 21 and 64, even if those
individuals are enrolled in Medicaid. This so-called “IMD exclusion” once prevented
BHD from collecting several million dollars of Medicaid revenue per year, though that
amount has declined recently because of BHD’s ability to collect T19 HMO
reimbursement from managed care organizations for individuals served at the Mental
Health Complex who are enrolled in one of the state’s Medicaid managed care
programs.8
The reimbursement rate for various inpatient and emergency procedures is established by
the state DHS and can be impacted by the state’s own budget challenges. Furthermore,
the rate often is established late in the calendar year, which means BHD can be subject to
mid-year budget deficits that are beyond its control when the state establishes new
reimbursement rates that are lower than anticipated and applies those rates retroactively.
Certain types of Medicaid eligibility – particularly for components of the Badger Care
program – are established by DHS and can impact the number of individuals served by
BHD for whom Medicaid reimbursement is even an option.
As will be discussed later in this report, despite these challenges, BHD is taking several steps to
enhance its collection of T19 revenue – both directly from the state and federal Medicaid
programs, and from the private HMOs that provide managed care services for thousands of
Milwaukee County Medicaid recipients. This is a logical undertaking for which the division
should be applauded given that it would appear to be the most elastic of BHD’s major revenue
sources (in contrast to the property tax and BCA) and the one over which it has the greatest
internal control. Whether that potential elasticity will allow patient care revenues to grow
rapidly enough to meet BHD’s mental health expenditure needs is a critical question, as is what
additional steps might be taken given the implementation of ACA to bolster those efforts.
8 The IMD exclusion is predicated on the federal government’s concern that local and state governments that run
inpatient mental health facilities will inappropriately steer clients into inpatient settings to avail themselves of
Medicaid reimbursement, as opposed to serving individuals in the community with services that may not be eligible
for similar levels of federal reimbursement.
BHD Fiscal Analysis Page 23
BHD 2012 ADOPTED BUDGET AND YEAR-TO-DATE EXPERIENCE
BHD’s 2012 adopted budget was highlighted by a handful of far-reaching initiatives that
reflected a substantial shift in the nature of inpatient operations, a commitment to investing more
heavily in community-based services in keeping with the principles of early mental health
redesign planning, and a continuation of efforts to shore up both the quality of Mental Health
Complex operations and the accuracy of certain key revenue projections.
Table 5 provides an overview of BHD’s 2012 budget, as compared to actual spending and
revenues in 2011. For the sake of consistency with previous tables in this report, we deduct
expenditures and revenues related to Emergency Medical Services.
Table 5: BHD 2012 Adopted Budget and 2011 Actual Expenditures and Revenues 2011A 2012B
Personal Services w/out fringe 46,382,064 45,085,763
Employee fringe benefits 31,990,379 30,368,100
Services 19,394,747 15,524,539
Commodities 7,079,988 5,949,492
Other charges 74,371,405 78,509,772
Debt and depreciation - -
Capital outlay 325,256 410,000
Capital contra - -
County service charges 40,421,891 42,526,368
Abatements (35,170,135) (37,236,708)
Total Expenditures 184,795,596 181,137,326
Direct revenue 61,355,869 58,064,298
State and federal revenue 61,584,993 58,019,971
Indirect revenue 10,002,135 9,800,590
Total Revenues 132,942,996 125,884,859
Property Tax Levy 51,852,600 55,252,467 Source: BHD BRASS fiscal reports
This broad budgetary snapshot reveals several notable points regarding the manner in which
county and BHD officials responded to the fiscal trends observed in the previous three years, as
well as the new momentum of mental health redesign planning:
BHD was able to secure an additional $3.4 million in property tax levy in the 2012 budget.
Approximately $3 million of that amount was inserted in the budget to fund a series of
initiatives linked to community resource investment consistent with mental health redesign
recommendations.
The budget projected continued substantial challenges on the revenue side, with both direct
revenue and state/federal revenue projected to decline by more than $3 million from 2011
actual amounts. Reductions in BCA and adult mental health community services funds from
the state were partially responsible, as were efforts to adjust certain revenue accounts to
BHD Fiscal Analysis Page 24
better reflect recent experience. On the positive side, BHD budgeted for a $250,000 increase
in WIMCR revenue resulting from an effort to maximize that revenue source with the help of
an outside consultant.
BHD’s personnel and fringe benefit costs both were budgeted to decline by more than $1
million from 2011 actual spending levels, despite the full-year impact of an initiative begun
in 2011 to increase the salaries of psychiatrists and psychologists. One cause of the decline
was an initiative to outsource the remainder of the TCM caseload. BHD also benefited from
cost-saving changes to the county’s employee health care package.
In Table 6, we drill down further into BHD’s 2012 budget by breaking down budgeted
expenditures in the four major mental health expenditure categories analyzed in the previous
section of this report. The table compares 2012 budgeted expenditure levels with actual
expenditure data from the previous three years and 2011 budgeted amounts.
Table 6: BHD 2012 Adopted Budget Expenditures in Four Key Service Areas
Source: BHD BRASS fiscal reports
Attributing too much significance to one–year differences in expenditures in various cost centers
at BHD is risky because such differences often can result from changes in methodology for
allocating internal service charges among BHD’s various centers, or other accounting changes.
Nevertheless, examining the change between 2011 and 2012 expenditures in the context of some
of the division’s 2012 budget priorities reveals the following observations:
2009 2010 2011 2011B 2012B
INPATIENT
Acute Adult Inpatient 31,034,465 33,418,023 32,789,264 32,809,336 32,138,850
Child & Adolescent Inpatient 5,455,167 5,845,757 5,939,470 5,797,415 5,543,000
TOTAL 36,489,632 39,263,779 38,728,733 38,606,751 37,681,850
PSYCHIATRIC CRISIS SERVICES
TOTAL 16,656,843 16,870,442 18,962,747 17,178,229 18,099,822
NURSING HOME
Hilltop 15,200,977 15,349,238 16,691,928 14,253,348 14,518,649
Rehab Central 13,689,632 13,303,236 14,311,442 11,742,044 13,089,851
TOTAL 28,890,609 28,652,474 31,003,370 25,995,392 27,608,500
COMMUNITY SERVICES
Day Treatment 2,175,128 1,904,575 2,182,728 2,325,711 2,298,886
CSP 9,407,231 9,854,590 10,178,138 10,085,680 9,886,580
TCM 4,826,990 4,349,195 4,132,733 4,589,382 3,646,050
SAIL 3,939,731 3,660,956 3,442,126 4,605,016 4,138,156
Community-based crisis services 520,644 1,100,935 739,530 812,635 2,692,635
Other community services 7,944,084 7,532,043 8,606,986 9,415,535 9,744,007
TOTAL 28,813,808 28,402,295 29,282,242 31,833,959 32,406,313
TOTAL BHD EXPS 110,850,892 113,188,991 117,977,093 113,614,330 115,796,486
BHD Fiscal Analysis Page 25
Despite a realignment of inpatient operations that reduced adult acute inpatient capacity from
96 to 85 beds (11.5%), adult inpatient expenditures were budgeted to decrease by only about
$600,000 (2%) from the previous year’s actual and budgeted amounts. This likely resulted
from a number of factors, including the need to accommodate inflationary increases in fixed
costs, and the fact that newly realigned inpatient units – while producing a substantial decline
in bed capacity – also incorporated the need for enhanced levels of treatment that precluded
sharp reductions in staffing levels. It is important to note that BHD officials viewed the
creation of new intensive treatment and women’s treatment units as quality improvement
initiatives, as opposed to cost-cutting strategies. Still, the 2012 budget shows that as BHD
looks to the future, reductions in bed capacity may not necessarily produce substantial
savings that can be reinvested in community-based services, at least to the extent that no
units are fully closed.9
While BHD was able to budget for an $800,000 reduction at PCS for 2012 when compared to
2011 actual spending, the 2012 budgeted amount was almost $1 million higher for PCS than
the 2011 budgeted total, and substantially higher than actual spending in the two years before
that. Thus, it appears the need to devote additional resources to PCS continued to be a fiscal
challenge for the division.10
Similarly, while budgeted nursing home expenditures in 2012 were substantially below
actual expenditures in 2011, they were $1.6 million higher than 2011 budgeted amounts.
This shows that when county and BHD officials formulated and adopted the 2012 budget
(using the 2011 budget as their base), the need to devote additional resources to BHD’s
nursing home facilities also continued to be a major fiscal challenge.
In the end, the county’s desire to jump-start mental health redesign by allocating an
additional $3 million to community services (most of which shows up in the community-
based crisis services line above) required an additional allocation of property tax levy
resources, as shown in Table 5. Fiscal savings achieved by outsourcing TCM services,
enhancing WIMCR revenues, reducing funding for BHD’s information technology vendor
(made possible by a new electronic medical records initiative), and implementing new cost-
saving strategies for pharmacy and dietary services did not free up resources for community
reinvestment, but instead were used to keep up with the demands of Mental Health Complex
operations. This is similar to the budget paradigm faced by BHD in previous years.
An analysis of actual spending and revenues through the first six months of 2012 also reveals
that several of the fiscal challenges that confronted BHD in 2009-2011 remain pressing today.
The division’s second quarter fiscal report projects a year-end deficit of $1.7 million. Of greatest
concern are a projected $770,000 deficit in patient care revenue and a $1 million deficit in
9 Another important variable in determining the financial savings that might be achieved via reductions in bed
capacity is the acuity levels of the remaining patient population. For example, to the extent that reductions in
inpatient capacity are achieved by transferring patients of relatively low acuity to private hospitals, thus leaving a
patient population at the Mental Health Complex with proportionately greater acuity levels, corresponding
reductions in staffing may not be possible. 10 It should be recognized that efforts during the past three years to update BHD’s cost allocation methodologies and
to otherwise “clean up” accounting procedures may have impacted PCS expenditures and may modify the
conclusion that service-related expenditure increases at PCS have been a major cost driver.
BHD Fiscal Analysis Page 26
personnel expenditures despite a remarkable reduction in the average daily adult inpatient census
from the 85 projected in the budget to 69. This would appear to indicate that a vastly reduced
inpatient census has logically produced a decline in revenues, but has not been met with a
corresponding decrease in inpatient expenditures.
In addition, despite BHD’s commendable efforts to address longstanding areas of budgetary
imbalance, it is notable that deficits again are forecast in overtime ($209,000), wages ($800,000)
and “other revenues” ($368,000). Collectively, these projections may indicate that the division’s
efforts to fill gaps in areas that have created substantial mid-year deficits in previous years –
while resulting in significant improvement – have not yet achieved complete success.
It is too early to comprehensively analyze BHD’s 2012 revenue performance, but there are a
couple of bright spots. One is a projected $377,000 surplus in WIMCR revenue, which reflects
BHD’s strategic approach to improving its cost reporting, and which may have even greater
future potential given that several new strategies recommended by an outside consultant have yet
to be implemented. Another is continued improvements cited by BHD fiscal officials in overall
revenue collection strategies, which will be aided by full implementation of an electronic
medical records (EMR) system and efforts to generate greater revenue from state-contracted
HMOs and the Family Care program. The second quarter report likely does not fully capture the
impact of those improvements, and BHD officials have expressed optimism that they will help
the division reduce or eliminate the patient care revenue deficit by the end of the year.
Overall, from the perspective of BHD’s mental health redesign planning, perhaps the most
cautionary financial conclusion from BHD’s 2012 budget and actual experience to date are that
1) a substantially reduced inpatient census at the Mental Health Complex has not freed up
resources for reinvestment in community-based services; and 2) the continued existence of a
structural deficit logically would make areas of structural imbalance the first target for any
savings that eventually might be realized by downsizing Mental Health Complex operations.
Again, it is important to note that the creation of new specialized adult inpatient units and the
reduction in census contained in the budget were not designed to produce budgetary savings, but
instead responded to longstanding operational challenges that may have impacted the quality of
inpatient care. It is apparent, however, that the reduction in inpatient revenues resulting from the
lower census has exceeded BHD’s ability to reduce costs, a reality that logically stems from the
fact that the division still is staffing four distinct inpatient units (and thus has not been able to
achieve substantial reductions in overhead), and that it has invested in higher staffing levels,
compensation and other necessities required to improve care. In addition, the acuity levels of
those being served at the Mental Health Complex likely has increased over time as the division
has reached agreement with private health systems to care for patients of lower acuity.
Hence, an overriding takeaway is that without substantial changes in either the scope of
operations or revenue performance, BHD likely will require an additional property tax levy
allocation again in 2013 to address a remaining structural budget hole and accommodate
inflationary increases in wages, benefits, commodities, and other fixed costs. If additional
investments in community-based care also are desired, then an even more substantial property
tax increase would be required.
BHD Fiscal Analysis Page 27
BHD 2013 BUDGET REQUEST
Analyzing the challenges faced by BHD in preparing its 2013 requested budget crystallizes the
division’s overriding fiscal challenges. As has been the norm for Milwaukee County during the
past decade, at the beginning of the county’s 2013 budget process in April 2012, departments
were instructed by the central budget office to develop budgets that would require no additional
property tax levy from their 2012 budgeted amount. Furthermore, they were instructed to do so
while absorbing centrally allocated increases in wages and benefits (both for active employees
and to account for BHD’s share of countywide legacy costs).
Consequently, as BHD officials and fiscal staff set out to develop their 2013 budget request, they
immediately were confronted not only with leftover problems discussed above from 2012 and
prior years, but they also were required to address a $4.6 million net increase in wage and benefit
increases required to support 2012 staffing levels. Table 7 shows how the four major service
areas analyzed in this report fared in response to those challenges by comparing expenditure
levels in the 2013 requested budget with those of previous years.
Table 7: BHD 2013 Requested Budget in Four Key Service Areas
Source: BHD BRASS fiscal reports
2009 2010 2011 2012B 2013R
INPATIENT
Acute Adult Inpatient 31,034,465 33,418,023 32,789,264 32,138,850 30,789,044
Child & Adolescent Inpatient 5,455,167 5,845,757 5,939,470 5,543,000 5,906,910
TOTAL 36,489,632 39,263,779 38,728,733 37,681,850 36,695,954
PSYCHIATRIC CRISIS SERVICES
TOTAL 16,656,843 16,870,442 18,962,747 18,099,822 19,219,364
NURSING HOME
Hilltop 15,200,977 15,349,238 16,691,928 14,518,649 13,689,945
Rehab Central 13,689,632 13,303,236 14,311,442 13,089,851 13,345,141
TOTAL 28,890,609 28,652,474 31,003,370 27,608,500 27,035,086
COMMUNITY SERVICES
Day Treatment 2,175,128 1,904,575 2,182,728 2,298,886 2,556,485
CSP 9,407,231 9,854,590 10,178,138 9,886,584 9,698,895
TCM 4,826,990 4,349,195 4,132,733 3,739,931 3,499,852
SAIL 3,939,731 3,660,956 3,442,126 4,138,156 4,247,423
Community-based crisis services 520,644 1,100,935 739,530 2,692,635 2,617,921
Other community services 7,944,084 7,532,043 8,606,986 9,650,122 9,687,950
TOTAL 28,813,808 28,402,295 29,282,242 32,406,313 32,308,526
TOTAL BHD EXPS 110,850,892 113,188,991 117,977,093 115,796,486 115,258,930
BHD Fiscal Analysis Page 28
This snapshot analysis reveals the following:
After a substantial increase in spending on community services in the 2012 budget, the 2013
request essentially maintains community services expenditures at the 2012 level. The table
above shows a slight decrease, but that is in part attributable to reduced expenditures from
outsourcing the Downtown CSP caseload.
BHD was able to reduce expenditures from 2012 budgeted levels on acute inpatient and
nursing homes. This largely resulted from two downsizing initiatives that are discussed in
greater detail below.
The trend of increased expenditures on PCS continues in the 2013 budget request, with an
increase of $1.2 million over the 2012 budgeted amount. This may be attributed, in part, to
efforts to transform the former Crisis Walk-in Clinic at the Complex to a Mental Health
Access Center, which provides a broader array of services.
A deeper examination reveals the following major fiscal strategies employed by BHD and
DHHS officials in their 2013 budget request that help explain these observations.
In addition to the fiscal challenges posed by wage and benefit increases for BHD’s
workforce, the division was required to accommodate more than $500,000 in additional
Mental Health Complex costs linked to increased dietary, security, maintenance and utility
costs and decreased space rental revenues. In addition, the requested budget includes $1.3
million related to the completion of the EMR project.
BHD officials continued their effort to “clean up” various expenditure and revenue accounts
to better reflect actual experience and reduce the structural deficit going forward. While
those steps exacerbated the division’s overall budgetary challenge in 2013, they reflect a
commendable effort that has occurred over the past several years to eliminate budget holes
caused by inaccurate or outdated budgeting and accounting. Some expenditure adjustments
were included in the Mental Health Complex cost increases cited above, while a major
revenue reduction was a $300,000 adjustment linked to an earlier revenue maximization
initiative.
BHD’s BCA allocation for 2013 was decreased by $1.8 million to account for the state’s
decision to “intercept” $2.7 million of BCA related to its takeover of Income Maintenance
programs, as opposed to charging the county that amount in property tax levy. Because the
move was tax levy neutral in DHHS’ overall budget, BHD’s requested budget includes an
additional $1.4 million in property tax levy, which helps offset the BCA reduction but still
leaves the division $400,000 short.
BHD included two major revenue increases in its requested budget to help bridge the budget
gaps cited above: a $2.4 million increase in WIMCR revenue (offset by a $192,000
consultant fee) attributed to cost report improvements suggested by its consultant; and a $1.1
million increase in patient care revenue from Family Care CMOs to support nursing home
clients who are eligible to be enrolled in the program. Both initiatives are laudatory from a
BHD Fiscal Analysis Page 29
financial perspective, but it should be noted that the amounts of additional anticipated
revenues from each are speculative.
BHD also included two major Mental Health Complex downsizing initiatives to reduce
expenditures: elimination of one unit (24 beds) from the Rehabilitation Center-Hilltop long-
term care facility, which is expected to produce $195,000 in savings in 2013 and eliminate 30
FTEs (annual savings will be substantially higher in 2014 and beyond, as the unit would not
be closed until July 1); and elimination of one 24-bed acute inpatient unit (effective April 1,
2013), producing a savings of $875,000 and eliminating 32.5 FTEs.
The requested budget includes an initiative to outsource the division’s Downtown CSP
program, for a net savings of nearly $400,000. This may represent one of the last substantive
outsourcing opportunities for BHD short of outsourcing direct Mental Health Complex
clinical services (the division also operates one remaining CSP on Milwaukee’s south side).
Overall, it is telling and quite familiar that despite accumulating $1.4 million in savings from
downsizing initiatives and $3.3 million in additional revenue from two new revenue
maximization initiatives, BHD found itself with next to nothing to invest in mental health
redesign-generated community resource recommendations (an investment of $50,000 was
included in the requested budget for this purpose). As in previous years, BHD’s fixed costs in
the areas of personnel and physical plant required substantial additional resources, so savings
generated from outsourcing, revenue maximization and – unique to 2013 – a substantial
downsizing of inpatient and nursing home units were steered toward those areas. Anything left
over was used to plug structural gaps observed in previous years.
From a financial perspective, operating in this fashion is both necessary and appropriate, and
BHD officials should be credited for developing cost-cutting and revenue-generating strategies
to plug holes and accommodate fixed cost increases without additional property tax levy support.
From a programmatic perspective, however, the goal of using Mental Health Complex
downsizing savings to enhance community-based care has remained highly challenging.
BHD Fiscal Analysis Page 30
LOOKING TOWARD THE FUTURE
The overriding purpose of this analysis was to analyze BHD’s overall financial condition, as
defined primarily by its need for increasing amounts of Milwaukee County property tax levy that
exceeds expected annual growth in the levy. Only after conducting that analysis can we consider
the primary question posed by the adult mental health redesign initiative, which is whether a
gradual downsizing of Mental Health Complex operations might not only allow BHD to achieve
fiscal stability, but also produce sufficient savings to sustain a meaningful expansion of
community-based services.
Based on the data provided by BHD, it appears that recent actions to downsize inpatient
capacity; outsource housekeeping, dietary and case management services; and maximize patient
care and cost reporting revenue have allowed BHD to substantially reduce longstanding
structural holes in its budget (at least on paper – some revenue projections still are uncertain). If
indeed that is the case, then the question moving forward is whether additional expenditure
reduction and revenue maximization strategies are available that might allow BHD to offset its
annual increases in personnel and fixed overhead costs with only inflationary increases in its
share of the county’s locally allocated resources. We analyze that question below from the
separate perspectives of both the expenditure and revenue sides of the budget ledger.
Expenditures
BHD’s ability to control annual expenditure increases at the Mental Health Complex may hinge
on the following:
1) Taming cost pressures at PCS. As discussed earlier, it is logical and intuitive that PCS
costs would have grown substantially during the past three years because of efforts to
enhance staffing levels/compensation and shore up the physical plant following increased
scrutiny of Mental Health Complex operations. It also is logical that PCS costs would have
increased more dramatically than acute inpatient and nursing home costs because offsetting
savings related to the dietary and housekeeping initiatives would not have been as
substantial. Still, we see that after a 13.8% increase in actual PCS expenditures from 2009 to
2011, BHD has been required to budget $1 million (or in excess of 5%) increases over the
previous year’s budgeted amounts in both 2012 and in its 2013 budget request. It is
important to note that those increases are not being driven by increases in PCS visits or
admissions, which have been relatively stable over the past four years.
BHD fiscal officials believe the sizable increase from 2009 to 2011 not only was caused by
beefed up staffing, security, etc., but also may have resulted from the way certain
expenditures on Mental Health Complex improvements were categorized. This reflects an
overriding problem observed during the course of this analysis that it is very difficult to
pinpoint cost pressures and their potential causes at BHD because budgeting and accounting
procedures often change from year to year.
Regardless of the extent to which significant increases in PCS expenditures can be attributed
to accounting issues, an important question is whether PCS operations have stabilized to the
BHD Fiscal Analysis Page 31
point that substantial enhancements of clinical staff should not be necessary in the
foreseeable future. If that is the case, and if recent sizeable investments in community-based
crisis services significantly reduce the demand for such services at the Mental Health
Complex, then there may even be potential to reduce PCS expenditures in future years.
During the past year, BHD has opened a second community-based crisis resource center,
created an enhanced Mental Health Access Clinic, and established a new Community
Linkages and Stabilization Program, each of which holds promise to reduce activity levels at
PCS. BHD officials may wish to further analyze the potential for expenditure reduction
strategies to correspond with lower activity levels and factor that potential into budget and
mental health redesign planning.
2) Realizing substantial relief from inpatient and Hilltop unit closures. Perhaps the most
important near-term fiscal question for BHD is whether the ongoing annual savings in
staffing and overhead produced by the closure of one acute inpatient unit and one unit at
Hilltop in 2013 (assuming those requests are adopted in the budget) will allow those major
cost centers to stop being the biggest annual drain on BHD’s overall budget. Because the
two proposed unit closures will not occur until mid-year, some additional savings also should
materialize in 2014 that may be available to help fund community enhancements. The larger
question, however, is whether after these steps are taken, will Mental Health Complex
operations be “right-sized” to the extent that annual increases in fixed costs going forward
can be covered by increases in patient care or other non-property tax revenues.
Unfortunately, our analysis of the cost savings projected by BHD from its unit closures
reveals that is unlikely to be the case. Table 8 reproduces figures from a BHD work
document used to develop the 2013 budget request that show initial projected cost savings
that would result from the closure of one of the four adult acute inpatient units as of April 1,
2013. This information shows that BHD initially projected an annual expenditure savings of
$2.5 million and an annual property tax levy savings of $1 million out of total expenditure
amounts of $30.3 million and $23.8 million respectively. The lower property tax levy
savings is caused by the estimated loss of $1.5 million of patient care revenue associated with
the reduced census.11
11 The savings amount of $875,224 cited in the requested budget differs from the amount shown in the table because
of changes that occurred when this and other initiatives were plugged into the county’s budgeting system (BRASS).
We use the budget figures shown in the table because this was the information that could be readily provided to us
by BHD. We are confident that even if we had access to and used the BRASS numbers, our overall findings would
have been the same. Also, we focus on the closure of an adult inpatient unit in this analysis, but the findings
generally are the same for the closure of a Hilltop unit.
BHD Fiscal Analysis Page 32
Table 8: Projected Annualized Savings from Closing One Acute Treatment Unit
Source: Work document provided BHD fiscal staff
The paramount question is why BHD is able to realize only a 4% savings in property tax levy
when it is reducing its bed capacity by 27% (24 of 88 beds). That BHD would not be able to
reduce its levy by a percentage that is directly proportional to the reduction in beds makes
intuitive sense given that substantial overhead and infrastructure needs remain for the three
units, and that it is impossible to reduce costs for items like heating, maintenance and
housekeeping on a proportional basis. Still, reason would dictate that savings of greater than
$1 million out of a $24 million property tax levy allocation should be achievable with the
closure of one of four adult inpatient units for nine months of the year.
Deeper analysis reveals that the cause for this discrepancy is the internal and external
crosscharges that are allocated to the acute adult inpatient budget. While Table 8 shows
substantial savings in personnel costs and commodities that are along the lines of what might
be expected from the closure of one unit, BHD estimates only a $163,000 (1.4%) savings
from its $11.3 million crosscharge allocation. This finding obviously suggests the need for a
deeper understanding of the nature of BHD’s internal and external crosscharges and the
methodology for allocating those costs, which we will attempt to convey briefly here.
BHD’s 2012 budget includes a total of $43.5 million in crosscharges. Of that amount, about
$6.2 million reflects BHD’s charges for services provided by other county government
departments (e.g. information technology support, central payroll and accounting, legal
services, architectural and engineering services, laundry services, sewer/water) or its share of
certain general county government costs that are budgeted centrally (e.g. worker’s
compensation, insurance services, computer mainframe charges). The remaining $37 million
consists of BHD’s internal overhead/administrative costs that are allocated to each major
subunit of the division proportional to that unit’s share of BHD’s overall budget.12 Those
costs are delineated by administrative/overhead cost center in Table 9.
12 About 20% of this $37 million consists of “legacy” costs that will remain an obligation of Milwaukee County
regardless of whether the personnel costs associated with the internal services are reduced or even eliminated.
2013 Baseline 2013 Request w/1 Closure
9-Month Savings
Personal Services 18,235,808 16,284,336 1,951,472
Services 545,291 443,049 102,242
Commodities 1,687,691 1,371,249 316,442
Other charges 1,040,505 1,040,410 95
Capital outlay 30,000 24,375 5,625
Crosscharges 11,331,451 11,168,882 162,569
Total Expenditures 32,870,746 30,332,301 2,538,445
Direct revenue 7,990,558 6,492,328 (1,498,230)
State and federal revenue - - -
Total Revenues 7,990,558 6,492,328 (1,498,230)
Property Tax Levy 24,880,188 23,839,973 1,040,215
BHD Fiscal Analysis Page 33
Table 9: BHD Administrative/Overhead Cost Centers
Cost Center 2012 Allocation
Central Admin 4,800,995
Psychiatry Admin 851,806
Psychology Admin 363,993
Nursing Admin 2,061,109
Organizational Dev 1,274,137
Personnel and Payroll 826,479
Quality Mgmt 614,646
Education 974,057
Security 687,479
Legal Services 442,993
Support Services Admin 70,775
Dietary 3,383,789
Storeroom 363,525
Pharmacy 97,659
Clerical Pool 801,182
Facilities Maintenance Admin 2,809,744
Facilities Maintenance Psych Hosp 3,507,418
Housekeeping 2,368,655
Linen 536,242
Facility Maintenance Day Hosp 440,000
Fiscal Admin 1,375,133
Fiscal Services 883,689
Accounts Receivable 1,459,634
Admissions 961,127
Mgmt Information 2,007,558
Medical Records 1,500,106
Staffing Office 611,167
Understanding the nature of these charges and their prominence in BHD’s adult acute
inpatient budget makes it easier to understand why the savings produced by the closure of
more than a quarter of BHD’s adult inpatient beds are relatively meager. For example,
support functions like accounts receivable, fiscal services and overall administration logically
cannot be cut at the same ratio as inpatient beds (e.g. if there are six accountants serving all
of BHD, it may not be possible to cut even one of those positions just because an inpatient
unit is closing). In addition, costs for maintaining and operating the physical plant – like
heating, water/sewer, groundskeeping, minor maintenance, security – would not diminish
significantly as long as Mental Health Complex operations remain at their current location.
Similarly, any reductions in the county’s central service costs that accrue from the reduction
in positions associated with one unit either are nonexistent or very small, and BHD’s share of
such savings is even smaller.
Consequently, it appears that from a fiscal perspective, the closure of a single acute adult
inpatient unit and a single unit at Hilltop (which produces an even smaller estimated
annualized savings of $239,000) should be viewed similar to the outsourcing of dietary and
housekeeping services at BHD. These are steps that address BHD’s immediate budget
BHD Fiscal Analysis Page 34
challenges and, in the process, decrease baseline operations spending. That puts the division
in a better position to combat inflationary fixed cost pressures in the future, but it appears
that the small decrease in baseline spending only makes a small dent in the overall structural
problem, and that it certainly does not free up substantial resources for community
investment.
This analysis also raises several important questions and potential action steps for the future,
including the following:
Has BHD conducted a thorough examination of the cost centers that comprise the $37
million in internal crosscharges to determine whether the impending closure of both an
inpatient and Hilltop unit could produce more sizeable savings?
If the closure of two units would not produce substantial savings in internal overhead and
administration, then how much additional downsizing would that take? Should BHD be
establishing a plan to engage in additional downsizing that might correspond with its
ability to realize significant savings in administration and overhead?
Would a new, smaller facility substantially reduce physical plant-related costs, or would
many of those costs remain in a new county-owned facility because they are tied to the
county’s larger cost allocation methodology? If many of those costs would remain, might
it be best for the county to focus on further consolidating operations at the existing
Complex, as opposed to pursuing a new county-owned facility?
The answer to those questions are imperative in determining BHD’s fiscal future. If it turns
out that closing additional units above those proposed in 2013 (if even possible from a
patient care perspective) would produce only incremental cost savings because of BHD’s
overhead realities, then county leaders face a difficult dilemma. They either must recognize
that providing inpatient, long-term care and emergency mental health services to a largely
indigent population is a money-loser and budget for that reality, or they will have to consider
getting out of the hospital and long-term care business entirely.
It also is difficult, after reviewing BHD’s administrative/overhead costs, to avoid asking
whether BHD would be better off contracting for the inpatient and long-term care beds it
deems necessary with one or more of the private hospital systems, which presumably would
have the ability to operate with a far less expensive administrative/overhead burden. That
would particularly be the case for a private system that already has a robust
administrative/overhead infrastructure and that could fold BHD’s operations into that
infrastructure for a reasonable additional cost. Of course, a critical question is whether a
qualified private sector provider that has the clinical capacity to appropriately care for BHD’s
most acute patients exists, and whether that provider (or providers) would be willing to
contract with BHD for those services under reasonable terms.
BHD Fiscal Analysis Page 35
3) Controlling annual increases in personnel costs. Even with the closure of two units and
the proposed outsourcing of the Downtown CSP caseload, BHD will continue to have the
second largest workforce of any organizational unit in county government. Consequently,
the division remains highly susceptible to having Milwaukee County’s overall personnel
costs drive its financial future.
One of the relatively surprising findings of this analysis is that county “legacy” and other
fringe benefit costs not only were not a driver of increased property tax allocations for BHD
from 2009 through 2012, but that the division actually benefited financially from countywide
health care changes, thus freeing up resources for other initiatives. It appears that may
change in 2013, however, as BHD was required to absorb more than $3 million in increased
pension and retiree health care costs in its 2013 requested budget.
As the Public Policy Forum has explained in several Milwaukee County fiscal analyses in
recent years, county legacy costs (and any increases in those costs) are not budgeted
centrally, but instead are allocated to departments based on their proportion of the county’s
active workforce. Consequently, labor-intensive departments like BHD suffer most from
overall increases in the cost of health care or the size of the county’s unfunded pension
liability, and they also are penalized when substantial workforce reductions occur in other
parts of county government.
BHD’s downsizing and outsourcing initiatives – as well as changes implemented by the
county to reduce the employer share of health care and pension costs – have benefited it
financially in recent years because of this methodology, but its capacity to avail itself of
personnel reduction strategies may be somewhat exhausted after 2013, unless it continues
with Mental Health Complex downsizing. Consequently, if county fiscal officials continue
their current methodology for allocating legacy costs – and those costs continue to
substantially outrun inflation – then any funding prioritization they may wish to give to
mental health-related community investments likely would need to take a backseat to efforts
to keep up with rising personnel costs.
At the very least, our analysis suggests it is inappropriate to treat BHD’s Mental Health
Complex operations like other county departments by allocating increasing shares of legacy
costs to the division, while insisting that it comply with flat or reduced property tax levy
directives. In addition to failing to recognize the unique inflation-related cost pressures faced
by BHD (such as rising pharmaceutical costs), this policy fails to recognize its unique
workforce demands. In a hospital setting, it is impossible to maintain vacancies in key
medical and nursing positions, and it is unrealistic to expect BHD to compete with private
health systems for medical personnel within an antiquated compensation structure that is
predicated on the salary structure of the rest of county government, as opposed to the
regional health care industry. The willingness of policymakers and fiscal officials to
recognize that BHD’s Mental Health Complex operations merit different budgetary treatment
may be particularly important given that BHD’s outsourcing and revenue maximization
strategies soon may be exhausted.
BHD Fiscal Analysis Page 36
Revenues
Similarly, there are a handful of key imperatives on the revenue side that will determine BHD’s
fiscal future.
1) Preparing realistic short-term and multi-year revenue projections. BHD has been
plagued for more than a decade by an inability to reliably estimate major patient care revenue
streams on an annual basis, thus placing the division in great danger of running mid-year
budget deficits and precluding its ability to engage in thoughtful long-range fiscal planning.
In many respects, the fault for this predicament does not lie with BHD, but with its reliance
on state and federal reimbursement rates that can shift significantly from year to year, and
that often are not even established until after BHD has adopted its annual budget or is well
into its fiscal year.
Nevertheless, BHD could improve its fiscal plight by 1) better documenting and explaining
the complexity of its major revenue projections to the central budget office and elected
officials so they have a better understanding of the need to manage the division’s financial
risk; 2) modeling annual and multi-year revenue scenarios and incorporating those scenarios
into annual and multi-year programmatic decision-making; and 3) refraining from plugging
uncertain revenue estimates into annual budgets, which only serves to exacerbate its revenue
uncertainty.
To their credit (as discussed above), BHD officials have made a concerted effort in recent
years to fill known revenue gaps and enhance the reliability of revenue collections and
projections with the EMR implementation and the use of cost reporting consultants. New
risk also has been created in recent years, however, from inserting uncertain revenue
projections associated with those strategies and other revenue maximization initiatives into
annual budget requests.
For a variety of reasons – including the transition to EMR and the intense workload of
BHD’s small fiscal staff – we were not able to secure the data needed to dig deeply into
BHD’s revenue picture for this analysis. We would recommend that going forward, the
division do that digging itself and paint a clear picture of each of its major revenue streams
and revenue initiatives. That should include analysis of potential threats and opportunities
regarding its patient mix – which has changed significantly in recent years because of efforts
to transfer growing numbers of patients to private health systems – and both short-term and
multi-year forecasts. That information should be provided at least annually for key decision-
makers in DAS, the county executive’s office and the county board.
2) Continuing efforts to improve its revenue collection acumen. We are impressed with the
manner in which BHD has focused in recent years on improving and enhancing its billing
processes and procedures, as well as with its ability to secure resources to invest in EMR and
cost reporting consultants. This reflects a conclusion – which is supported by our analysis –
that enhancing patient care revenues is one of the most important long-term strategies BHD
can pursue from a financial perspective, given the dim prospects for additional general
BHD Fiscal Analysis Page 37
support from the State of Wisconsin, and the desire to use any increases in property tax levy
for enhancement of community-based services.
While there is no question that EMR and other strategies currently being pursued by BHD
fiscal staff have potential to produce several million dollars of increased revenue annually, it
will be important for the division to attempt to quantify the difference such improvements
may make. As explained above, our capacity to do so for this analysis was limited by lack of
data.
Let us assume, however, that even after accounting for the increases in WIMCR and EMR-
generated revenue that are contained in the 2013 requested budgeted, there is potential to
further increase patient care revenue by 10-15% per year, or about another $4-5 million
annually. That, of course, would be a significant infusion of additional revenue for BHD, but
in light of its remaining structural problems and the division’s fixed cost pressures, it still is
questionable whether it would be enough to obviate the need for increased property tax
revenue and allow for increased investments in community-based services.
Another important revenue collection initiative involves the division’s efforts to extract
greater levels of reimbursement from Family Care CMOs for eligible individuals housed at
Hilltop. Again, this initiative makes sense from numerous perspectives. If it is viewed by
BHD as a key piece of its long-term fiscal puzzle, however, then it should be accompanied
by realistic estimates of its revenue enhancement potential, as well as transparent information
for DAS and policymakers regarding key barriers and how those might be overcome. A key
issue for BHD, for example, will be its ability to work with guardians of those housed at
Hilltop to convince them that enrollment in Family Care and a community-based approach to
care for their loved ones is appropriate. BHD may wish to lay out that challenge for fiscal
officials and policymakers to promote a better understanding of the revenue potential
associated with its Family Care strategy, as well as the potential impact on long-term
downsizing plans.
3) Responding to the ACA and changes in Medicaid. As discussed in the Introduction, a
secondary purpose of this analysis – in addition to providing a baseline assessment of BHD’s
fiscal condition to assist mental health redesign deliberations – is to inform consideration
about potential opportunities related to implementation of the Affordable Care Act. We find
that ACA has considerable potential to benefit BHD by reducing its volume of uninsured
patients. At the same time, however, potential major changes in Medicaid reimbursement
rates that may result from federal and state budget challenges pose a considerable potential
threat.
With regard to the ACA, our analysis shows that roughly 23% of all admissions to inpatient
and PCS in 2011 (a total of 3,842 admissions) lacked an insurance source. Given that BHD’s
total billable costs in 2011 for inpatient and PCS services were about $60 million, if ACA
implementation substantially reduced that number, then several million dollars of additional
revenue could materialize.
BHD Fiscal Analysis Page 38
To illustrate that point, let’s assume that ACA implementation cut the number of uninsured
admissions to inpatient and PCS in half, or by roughly 1,900 admissions. It is not possible to
discern BHD’s potential cost recovery for the additional covered admissions because we do
not know the level of insurance coverage that would be provided. We do know, however,
that in 2011, BHD’s reimbursement rates for adult inpatient, CAIS and PCS services were
23%, 56%, and 24% respectively. Those rates do not reflect reimbursement rates for covered
patients because they include the uninsured population, so we would need to bump them up a
bit. If we do so by assuming that BHD could have received reimbursement for 40% of its
billable costs for an additional 1,900 individuals in 2011, at an average billable cost of
$3,698 per admission (this is the actual 2011 average for these three service categories
combined), then we can estimate that BHD hypothetically could have collected an additional
$2.8 million in reimbursement revenue under our assumed scenario.
In addition to providing coverage to significant numbers of additional patients, ACA also
could positively impact BHD’s revenue streams by eliminating or modifying the IMD
exclusion; expanding Medicaid coverage to additional behavioral health-related services; or
enhancing Medicaid reimbursement rates for certain services. Conversely, if federal and
state budget challenges necessitate further limitations on Medicaid coverage for certain
services (such as TCM, which almost became a non-reimbursable service several years ago),
or a reduction in current reimbursement rates, then any gains realized by reducing the
uninsured population could be negated.
It is too early to tell how ACA implementation will impact these questions, or whether the
law will be implemented in its current form at all. Our analysis does give a sense of the
financial stakes that may be involved, however, and the need for BHD to be closely
monitoring these issues and incorporating various scenarios into its fiscal and redesign
planning.